Ahead of the start of the new stock market week, futures in Europe are trading slightly lower, after a rally at the end of last week, in which the indices erased the entire weekly decline. Sentiment in Asia was positive at the start of the week, with most markets higher following Friday’s positivity on Wall Street as global markets continued to defy concerns about economic growth. US futures are trading with a minimal overnight decline, hinting at some cooling of the hype from last week, and it is possible that in the current week we will see positioning of the market participants, before the Fed meeting next week.
The dollar index is partially higher at the start of the new week, partly reflecting rising US yields. The euro and pound remain under pressure.
Before the start of the stock exchange session, futures in Europe are trading with a slight decline, as:
EuroStoxx 50 down 0.16%
Dax down 0.09%
FTSE down 0.01%
The economic calendar for Europe is data-heavy today, with a range of PMI releases expected from the region:
-10:50 a.m. – French Composite & Service PMI /forecast slight decline/
-10:55 a.m. – Germany Composite & Service PMI /forecast slight growth/
-11:00 a.m. – EuroZone Composite & Service PMI /forecast slight decline/
-11:30 a.m. – UK Composite & Service PMI /forecast slight decline/
-4:45 p.m. – US Composite & Service PMI /estimated slight increase/
Over the past two weeks, Europe has been steadily losing its edge in the markets, with Euro Markets narrowing in breadth, while US markets have better performance and breadth. Growth in Europe is reported only in the Technology sector, all other sectors report a decline, which hints at deteriorating sentiments of the market participants of the euro markets.
Despite the narrowing breadth of markets, the German Dax managed to bounce back above the psychological 16K, closing the week close to the weekly opening levels, hinting at residual charge among bullish participants. Trading volumes are above average, with the long term bullish outlook still maintained/confirmed by the support at the 65MA and holding above the February highs.
The DeMarker Oscillator is heading north from neutral territory, with buy-side volumes also improving after OBV reached near yearly lows since January.
Futures are currently retreating, with the index slightly above the upper limit of the April range, in a zone of horizontal resistance. Levels around 16K are a strong psychological boundary that puts pressure on quotes, today we may see a slight correction in Dax, but a close above 15,900 and 23.6FIBO levels will give confidence to bullish participants.
The current week could see traders repositioning and profit-taking given the high levels of the indices, with the Fed meeting expected next week, which is key to the direction of global markets. Increased caution among participants is expected, and volatility may remain high.
Dealer Alexander Alexandrov